Mr. Waqas obtains an asset under Ijarah from an Islamic bank. The asset has a value at the start of the contract of PKR 68,000 and is estimated to have a useful economic life of 3. The contract starts on 1 January Year 1 and lasts 3 years; the trader does not have the option to cancel the contract early. The trader agrees to pay equal monthly installments, and the first payment made by the trader will be at the start of the contract. Furthermore, the trader will pay the residual value at the end of the third year and will purchase the asset. The estimated value of the asset after 3 years is PKR 10,000, and this is also the guaranteed minimum value of the asset at the end of year 3. The profit rate by the bank is 10%. Required: Calculate monthly payments and Islamic Bank’s profit

Mr. Waqas obtains an asset under Ijarah from an Islamic bank. The asset has a value at the start of the contract of PKR 68,000 and is estimated to have a useful economic life of 3. The contract starts on 1 January Year 1 and lasts 3 years; the trader does not have the option to cancel the contract early. The trader agrees to pay equal monthly installments, and the first payment made by the trader will be at the start of the contract. Furthermore, the trader will pay the residual value at the end of the third year and will purchase the asset. The estimated value of the asset after 3 years is PKR 10,000, and this is also the guaranteed minimum value of the asset at the end of year 3. The profit rate by the bank is 10%. Required: Calculate monthly payments and Islamic Bank’s profit

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 16DQ

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